- TIA EXAM 5 - FRIEDLAND CH 16

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CDP
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76679
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- TIA EXAM 5 - FRIEDLAND CH 16
Updated:
2011-04-01 20:48:32
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TIA EXAM FRIEDLAND
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FRIEDLAND CH 16
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  1. What is DCC?
    • Defense and cost containment
    • Includes all defense litigation and medical cost containment expenses
  2. What is A&O?
    • Adjusting and other
    • Includes all claim adjusting expenses
  3. What are the key factors on whether development methods can be used for adjustment expenses?
    • If sufficient detail is available such that data can be organized by AY (or PY, UW Y,or RY)
    • If the expenses tend to track accident (PY, UY,RY) or are more dependent on CY
  4. Describe the Multiplicative approach for the Ratio of paid ALAE-to-paid clm dvmt
    • Project ultimate claims (using appropriate technique - text uses paid & rpt dev)
    • Develop ratio of paid ALAE-to-paid claims to ultimate
    • Ultimate ALAE = Ultimate Claims * Ultimate Ratio of paid ALAE-to-paid claims
  5. What is the assumption with the multiplicative approach for ALAE?
    Relationship btwn ALAE & Clms is relatively stable over experience period
  6. List 3 Adv and 2 Disadv of Multiplicative ALAE approach
    • Advantages
    • 1. Recognizes the relationship between ALAE and claims
    • 2. Ratio development factors tend not to be as highly leveraged
    • 3. Easy to interject actuarial judgment in projection analysis
    • Disadvantages

    • 1. Any error in estimate of ultimate claims could aff ect estimate of ultimate ALAE
    • 2. For some lines, large amounts of ALAE may be spent on CNP
    • Important to review large claims and maybe project estimates separately
  7. Describe the Additive approach for the Ratio of paid ALAE-to-paid clm dvmt
    • 1. Project ultimate claims (using appropriate technique - text usespaid and rpt dev)
    • 2. Develop ratio of paid ALAE-to-paid claims to ultimate
    • **Take diff erences between ratios at successive ages and select
    • **Age-to-ultimate factor is then the cumulative sum from age to ultimate
    • 3. Ultimate ALAE = Ultimate Claims * Ultimate Ratio of paid ALAE-to-paid claims
  8. What is an advantage of additive ALAE approach?
    More stable approach when ratios are very small at early maturities

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